 Protectionism, Trade and GrowthChapter 7 in Endogenous Growth, Market Failures and Economic Policy, 1999, pp 113-128 from Palgrave Macmillan Abstract: Abstract Recent literature on trade argues that free trade may not necessarily be a desirable setting, as the standard Pareto-efficiency argument of perfect markets may not hold. In contrast to the previous literature, this model introduces the initial level of quality as an input to the “production” process of future products as a novel fact. This seems to fit the facts quite well, considering that very few countries are leading the worldwide innovation process. In this chapter, I try to ask whether “offensive” protectionism can be a possible policy to foster economic growth. A utilitarian model with exogenous product diversification but endogenous quality improvements is analyzed, in which a country with a relatively high quality level exhibits decreasing marginal productivity in research. Protectionism increases relative research productivity and fosters growth and product development. Therefore countries may eventually catch up, and Smithian absolute advantage with equal income in both countries is feasible. Keywords: Product Line; Free Trade; Trade Policy; Transition Economy; Balance Growth Path (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-27129-0_7 Ordering information: This item can be ordered from DOI: 10.1007/978-1-349-27129-0_7 Access Statistics for this chapter More chapters in Palgrave Macmillan Books from Palgrave Macmillan |
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